AAPT should stay independent, says analyst

Last week's $1.49 billion hostile takeover bid by Cable & Wireless Optus (C&W Optus) for AAPT would seriously damage competition in Australia's telecommunications market if it succeeds, a leading industry analyst said yesterday.

C&W Optus is Australia's second-oldest and second-largest carrier after Telstra. AAPT has recently been establishing itself as the third major force in the market. According to analyst Paul Budde, the takeover of AAPT would return Australia's telecommunications market to a noncompetitive duopoly.

"AAPT has done more for competition over the last few years -- through very aggressive pricing in business, residential and Internet markets -- than Optus has done since its inception in 1992," Budde said in a report released yesterday. "It would be a very sad outcome indeed if this company were to disappear amidst the bureaucracy of Optus. It would be back to the good old duopoly, just when we were beginning to see some real competition in the market."

Budde said that initiatives taken by AAPT over the last few months have been welcomed as major new developments, namely, offering more, better and cheaper services not only in metropolitan Australia but also in regional and rural areas.

"It would be far better for the country if these initiatives were to be developed independently of the two incumbent players," he said in the report.

Budde said that the greatest threats to duopolies worldwide have traditionally come from new competitors rather than from struggles between the incumbent companies. In Australia, it is the new telecom companies that are winning the battles, increasing their revenues by 62 per cent last year, Budde said.

The bid by C&W Optus, a local operating company of UK telecom carrier Cable & Wireless PLC, for AAPT was sparked last week by Singapore Telecommunications (SingTel), which sold most of its minority stake in AAPT to C&W Optus for $US140 million.

AAPT chairman Lee Casey rejected the C&W Optus bid earlier this week as inadequate. He also disclosed that his company is in discussions with a number of other international telecommunications companies regarding alliances, joint ventures or mergers.

PCW Evaluation Team

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